Regulated online gambling in states like New Jersey and Nevada could get a boost starting April 17th with the anticipated introduction of new Merchant Category Codes (MCC) for regulated online gaming transactions.

“MasterCard, Visa, American Express and Discover, for one of the very first times, have now agreed on new MCCs related to Internet gaming.” Vantiv’s Vice President of Operations TJ Sharkey recently wrote in Casino Enterprise Management.

Three new codes are set to be introduced:

State-run online lotteries (7800)

State-run online casino games (7801)

State-run online dog/horse racing (7802)

These codes will join the already existing 7995 code, which will now designate unregulated online gaming transactions only.

Banking system lags behind the legal system

Despite online gaming being regulated in three states, and online lotteries available in four states and counting, many banks and financial institutions have continued to take a conservative approach when it comes to dealing with the fledgling industry.

A number of banks, including Bank of America and Wells Fargo, continue to block transactions for all forms of online gambling, regardless of whether or not they originate from a regulated or unregulated site.

Policy has hampered industry growth

Credit card success rates have improved since online gaming launched, but any measurable percentage of declines is simply too high and is regularly cited as one of the key factors behind falling traffic levels at New Jersey’s regulated online poker sites.

Imagine the consternation and lack of confidence the public would have if 40% of Amazon.com purchases were declined by the cardholders issuing bank.

“Credit card issuer and suppliers’ hesitancy to support iGaming transactions has hobbled the industry here in the United States,” said Matthew Katz, the CEO of CAMS, a player verification company in the regulated U.S. market.

CAMS CEO Matthew Katz will lead a panel at the upcoming iGNA conference on Payment Processing in the regulated U.S. iGaming market.

Too much risk; too little reward

In the legal U.S. markets, credit card decline rates continue to be exceedingly high, as banks continue to err on the side of caution, apparently harboring the fear of running afoul of UIGEA when it comes to processing online gambling transactions.

UIGEA is still in place and banks may feel they are taking an unnecessary risk processing these transactions. And banks may fear unanticipated liability beyond UIGEA given the early-stage nature of the market.

Combine that with the fact that only a small percentage of the U.S. population can access legal online gaming, and only a small percentage of the people with access will use their credit card to gamble online.

What the new codes change, and what they won’t

The hope is these new codes will alleviate the current issues players in Nevada, Delaware, and New Jersey are having with their credit cards being declined when they attempt to deposit money.

Unfortunately, the issue is not going to be solved with the implementation of a new code alone.

Essentially, the new MCC codes will do nothing more than provide financial institutions with more peace of mind and clarity if they decide to process these types of transactions.

Processing not mandatory

Banks are under no legal obligation to process certain types of transactions, and gambling is a classification that several big financial institutions have historically steered clear of – in addition to Bank of America and Wells Fargo, PayPal and American Express do not process online gambling transactions.

So, even with the new codes, banks still have the ability to decline transactions whether they are coded with the preexisting 7995 code, or the new 7800-7802.

Individual banks still need to make individual decisions

And it’s likely a number of institutions will continue to decline processing any online gambling transactions until the markets are substantially larger, or until there is more clarity when it comes to online gambling’s legality at the federal level.

In the end it will still be up to each individual bank/credit card company to determine if processing online gaming transactions is something they want to do.

And that means that depositing with a credit card at one of NJ’s regulated online casinos could remain a frustrating patchwork of success and failure in the near term.

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Steve Ruddock -
Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.